There are several kinds of marijuana stocks. Some are about as pure-play as you can get, like stocks of marijuana growers. Others make a significant portion of their revenue providing supplies to the marijuana industry. And there are a handful of stocks of biotechs that have cannabinoid-focused products or pipeline candidates. 

Insys Therapeutics (NASDAQ:INSY) and Cara Therapeutics (NASDAQ:CARA) fall into the third category. However, the designations of both Insys and Cara as marijuana stocks warrant an asterisk. Insys' cannabinoid drug Syndros is based on a synthetic form of THC, the primary psychoactive chemical in marijuana. Cara has a cannabinoid receptor agonist, CR701, in preclinical development.

Neither of these stocks has performed well over the last 12 months. Insys is down more than 40% during the period, while Cara's share price has dropped around 20%. Which of these two biotech stocks is the better choice for investors now? Here's how Insys and Cara compare.

Marijuana leaf next to beakers with green liquid

Image source: Getty Images.

The case for Insys Therapeutics

Insys certainly has some challenges on its hands. Sales for the company's top-selling product, Subsys, have plunged in the midst of the opioid epidemic in the U.S. Former Insys executives have been indicted for alleged fraud connected with promoting the drug. Insys remains under investigation by the U.S. Department of Justice (DOJ) for its past sales and marketing practices related to Subsys.

There are some positives for the beleaguered biotech, though. While sales for Subsys continue to fall, the rate of decline is slowing. Sooner or later, Insys should see some stabilization for Subsys. When that happens, the focus could shift to the company's other products.

Syndros is currently the only other approved product for Insys. The biotech launched the cannabinoid drug last year. So far, the ramp-up in sales for Syndros has been very slow. However, Insys continues to work with managed care payers to loosen up their purse strings for paying for the drug. If the company is successful in these efforts, sales for Syndros could kick into high gear.

Perhaps the best thing going for Insys is its pipeline. The stock enjoyed a nice boost in April after Insys announced that it was moving forward with clinical development of an inhaled version of dronabinol. The company hopes to win FDA approval this summer for buprenorphine sublingual spray in treating moderate-to-severe acute pain. Insys also has several other cannabinoids and other types of drugs in development.

One other plus for Insys might seem like a negative at first glance. Over 40% of the stock's float is currently sold short. Any good news for Insys -- for example, a settlement with the DOJ -- could result in a short squeeze that would push Insys stock much higher.

The case for Cara Therapeutics

Cara's headwinds seem like a mild breeze compared to those for Insys. The biotech experienced a setback last year when an oral version of experimental kappa opioid receptor agonist CR-845 (now called Korsuva) didn't significantly reduce pain in patients compared with placebo in a phase 2b study. But it was a bump in the road rather than a dead end for the drug.

Cara switched more of its focus for Korsuva to treating pruritis (itching). The company is evaluating an injection version of the drug in phase 3 clinical studies for treating chronic kidney disease-associated pruritis (CKD-aP) in patients undergoing hemodialysis. Cara also has phase 1 studies under way for an oral version of Korsuva in treating CKD-aP in patients not on hemodialysis and as a treatment for chronic liver disease-associated pruritis (CLD-aP).

The biotech hasn't given up on the possibility for CR-845 in treating pain, though. Results from a phase 3 clinical study of an intravenous version of the drug in the treatment of acute post-operative pain in patients undergoing abdominal surgery should be announced within the next six weeks.

If Korsuva is successful in clinical testing, Cara should have a tremendous market opportunity. There are no approved treatments currently for CKD-aP. And if the late-stage pain study goes well, that opportunity will be even larger. As a kappa opioid receptor agonist, the drug doesn't easily penetrate the blood-brain barrier. That means Korsuva has few of the serious side effects associated with opioids, which include a high potential for addiction, nausea and vomiting, and respiratory depression.

For now, at least, cannabinoids don't have an important role in the investing thesis for Cara Therapeutics. Although cannabinoid receptor agonist CR701 is a preclinical asset for the biotech, Cara's focus is solely on advancing Korsuva right now.

Better marijuana stock

I once viewed Insys as a solid turnaround opportunity in 2018. However, the continued slump for Subsys, slow launch for Syndros, and the dark cloud of the ongoing DOJ investigation made me rethink my position. I think that Insys could be successful over the long run, but Cara Therapeutics is the better pick right now, in my opinion -- even though it's only a nominal marijuana stock.

Korsuva looks especially promising in treating pruritis. I think Cara has a pretty good shot at winning approval in the CKD-aP hemodialysis indication in the not-too-distant future. That indication alone should make the stock worth a lot more than it is now.

While I like Cara's chances, keep in mind that the stock could take a beating if results from the upcoming phase 3 pain study aren't positive. I like the stock and think buying a small position in Cara could pay off handsomely over the next few years, but there could be a lot of volatility along the way.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.